STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of March 10,
2003, by EDO Corporation, a New York corporation ("Buyer"), Xxxxxxx X. Xxxx, an
individual resident in the Commonwealth of Virginia, Xxxx X. Xxxxxxx, an
individual resident in the State of Maryland, and Xxxx X. Xxxxx, an individual
resident in the State of Maryland (each individually, a "Seller" and,
collectively, the "Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of capital stock of Darlington
Inc., a Delaware corporation (the "Company"), for the consideration and on the
terms set forth in this Agreement, and, in connection with the sale of the
Shares, certain of the Sellers shall enter into Employment and Non-Competition
Agreements or a Consulting and Non-Competition Agreement (each as defined
below).
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ADJUSTMENT AMOUNT" shall have the meaning set forth in Section 2.5.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, claims, demands, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, Taxes, liens, losses, expenses, and fees,
including court costs and reasonable attorneys' fees and expenses.
"AFTER-TAX BASIS" means, with respect to any payment to be made to an
Indemnified Person, the amount of such payment supplemented by a further payment
or payments so that, after deducting from such aggregate payments the amount of
all Taxes (net of any actual current credits, deductions or other Tax benefits
arising from the payment by the Indemnitee of any amount, including Taxes, for
which the payment to be received is made) which would be imposed on such
Indemnitee with respect to such payments if such payments were subject to the
highest marginal combined federal, state and local income tax rate which could
be applicable to such Indemnitee, the balance of such payments shall be equal to
the original payment to be received.
"ANCILLARY AGREEMENTS" means the Consulting and Non-Competition
Agreement, the Employment and Non-Competition Agreements, the Escrow Agreement
and the Sellers' Releases.
"APPLICABLE CONTRACT" shall mean any Contract (a) under which the
Company has or may acquire any rights, (b) under which the Company has or may
become subject to any obligation or liability, or (c) by which the Company or
any of the assets owned or used by it is or may become bound.
"BALANCE SHEET" shall have the meaning set forth in Section 3.4(b).
"BREACH" shall mean a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement which will be deemed to have occurred if there is or
has been any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
and the term "Breach" means any such inaccuracy, breach or failure.
"BUYER" shall have the same meaning set forth in the first paragraph of
this Agreement.
"CLEANUP" means any corrective action, including any investigation,
cleanup, removal, containment, or other remediation of response actions required
by applicable Environmental Law or Occupational Safety and Health Law (whether
or not such Cleanup has been required or requested by any Governmental Body or
any other Person).
"CLOSING" shall have the same meaning set forth in Section 2.3.
"CLOSING DATE" means the date and time as of which the Closing actually
takes place.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"COMPANY" shall have the meaning set forth in the Recitals of this
Agreement.
"CONFIDENTIAL INFORMATION" shall mean any and all confidential business
information and any and all information, however documented, that is a trade
secret within the meaning of applicable statutory or case law concerning the
business and affairs of the Company or the Buyer, whether or not marked as
"secret" or "confidential," including, without limitation, (i) product
specifications; data; know-how; formulas; compositions; processes; designs;
sketches; photographs; graphs; drawings; samples; inventions and ideas; past,
current and planned research and development; current and planned manufacturing
or distribution methods and processes; customer lists; current and anticipated
customer requirements; price lists; market studies; business plans; computer
software and programs (including object code and source code); database
technologies, systems, structures and architectures (and related formulas,
compositions, processes, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information of the Company or
Buyer); (ii) to the extent such information is not publicly disclosed by the
Company or the Buyer in filings with Governmental Bodies, in press releases or
otherwise, all financial statements; financial projections and budgets;
historical and projected sales; capital spending budgets and plans; the names
and backgrounds of key personnel, personnel training techniques and personnel
materials; and (iii) any and all notes, analysis, compilations, studies,
summaries and other material prepared by or for the Company or the Buyer
containing or based, in whole or in part, on any of the foregoing information.
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"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONSULTING AND NON-COMPETITION AGREEMENT" shall have the meaning set
forth in Section 2.4(a)(iv).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated
by this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Employment and
Non-Competition Agreements, the Consulting and Non-Competition
Agreement, the Sellers' Releases, and the Escrow Agreement;
(c) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and exercise
of control over the Company.
"CONTRACT" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" shall have the meaning set forth in Section 6.2.
"DEFECTIVE ELECTION EVENT" shall have the meaning set forth in Section
6.11(a).
"DEFERRED COMPENSATION AGREEMENTS" means the Deferred Compensation
Agreements between the Company and Xxxxx X. Xxxxx and each of the Sellers,
respectively.
"DISCLOSURE LETTER" means the disclosure letter delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"DOD" means the United States Department of Defense or any branch or
agency thereof.
"EDO GROUP" means EDO Corporation and all members of the affiliated
group of corporations (within the meaning of IRC Section 1504) of which EDO
Corporation is the parent, and their respective successors and assigns.
"EMPLOYMENT AND NON-COMPETITION AGREEMENTS" shall have the meaning set
forth in Section 2.4(a)(iii).
"ENCUMBRANCE" means any charge, claim, community property interest,
condition, equitable interest, lien, mortgage, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership, excluding transfer restrictions arising under
applicable federal or state securities laws.
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"ENVIRONMENT" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health Law including
fines, penalties, judgements, awards, settlements, investigative or inspection
costs and financial responsibility for cleanup costs, corrective action, and
other remedial or response action.
"ENVIRONMENTAL LAW" means any Legal Requirement currently in effect
that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or
other prohibitions and of the commencements of activities,
such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human
health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or
other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public
interest to recover for injuries done to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law, and regulations and rules
issued pursuant to that Act or any successor law.
"ERISA AFFILIATE" shall have the meaning set forth in Section 3.13(a).
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"ESCROW AGENT" shall have the meaning set forth in Section 2.4(c).
"ESCROW AGREEMENT" shall have the meaning set forth in Section 2.4(c).
"FACILITIES" means any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles) currently or
formerly owned, occupied or operated by the Company.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.4.
"GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4 (a) and (b) were prepared.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"GOVERNMENT CONTRACT" means a Contract, bid or proposal between the
Company and the DOD or any other Governmental Body, including any facilities
contract for the use of government-owned facilities.
"GOVERNMENT SUBCONTRACT" means a Contract, bid or proposal that is a
subcontract between the Company and any third party relating to a prime contract
with the DOD or any other Governmental Body.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Company.
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"HAZARDOUS MATERIALS" means any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"INDEMNIFIED PERSONS" shall have the meaning set forth in Section 6.2.
"INDEMNITEE" shall have the meaning set forth is Section 6.11(a).
"INDEMNITY PAYMENT" shall have the meaning set forth is Section
6.11(b).
"INTELLECTUAL PROPERTY ASSETS" shall have the meaning set forth in
Section 3.22(a).
"IRC" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE" means with respect to an individual that such individual
will be deemed to have "Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the
course of conducting a reasonably comprehensive investigation
concerning the existence of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, partner, employee, executor, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" means any applicable federal, state, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
properties, assets, business and financial condition of the Company taken as a
whole, provided however, that the following shall be deemed not to constitute a
Material Adverse Effect: (i) any adverse consequences arising from the failure
of the Company to qualify as a "small business" as a result of the Contemplated
Transactions; (ii) changes in the economy generally; (iii) the payment of fees
and expenses (including legal, accounting, investment banking and other fees and
expenses) incurred in connection with the Contemplated Transactions and
reflected in the Closing Financial Statements; (iv) the payment of any amounts
due, or the provision of any other benefits, to any officers or employees under
agreements or employee benefit plans in place on the date of this
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Agreement as set forth in the Disclosure Letter; or (ii) any change in GAAP or
applicable Legal Requirements.
"NET BOOK VALUE" means (i) total assets of the Company minus (ii) total
liabilities of the Company each as determined in accordance with GAAP.
"OCCUPATIONAL SAFETY AND HEALTH LAW" shall mean any Legal Requirement
currently in effect designed to provide safe and healthful working conditions
and to reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means with respect to a Person that an
action taken by such Person will be deemed to have been taken in the "Ordinary
Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal
day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising
similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same
line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" means the articles or certificate of
incorporation and the bylaws of a corporation, and any amendment to either of
the foregoing.
"PERMITTED LIENS" shall have the meaning set forth in Section 3.6.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLANS" shall have the meaning set forth in Section 3.13(a).
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
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"RELATED PERSON" means with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar
capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity);
and
(f) any Related Person of any individual described in clause (b)
or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing more than 10% of the outstanding voting power of a Person or equity
securities or other equity interests representing more than 10% of the
outstanding equity securities or equity interests in a Person.
"RELEASE" means any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECTION 338(h)(10) ELECTION" shall have the meaning set forth in
Section 5.2.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant thereto or any
successor law.
"SELLERS" shall have the meaning set forth in the first paragraph of
this Agreement.
"SELLERS' BROKER" shall have the meaning set forth in Section 3.26.
"SELLERS' RELEASES" shall have the meaning set forth in Section
2.4(a)(ii).
"SELLERS' REPRESENTATIVE" shall have the meaning set forth in Section
7.12.
"SHARES" shall have the meaning set forth in the Recitals of this
Agreement.
"SOLE FORMER SHAREHOLDER" shall mean Xxxxx X. Xxxxxxx.
"TAX" means any tax (including, without limitation, any income tax,
capital gains tax, value-added tax, sales tax, use tax, gift tax, franchise tax,
transfer tax, ad valorem tax, excise tax, payroll tax or estate tax), levy,
duty, assessment, deficiency, withholding or other fee and any related charge or
amount (including any fine, penalty, interest or addition to tax) imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax- sharing agreement or other Contract relating
thereto.
"TAX LOSS" shall have the meaning set forth in Section 6.11(b).
"TAX RETURN" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" means a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the Environment
that may result from such Release.
"WAIVER" shall have the meaning set forth in Section 7.3(c).
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this Agreement,
at the Closing, Sellers will sell and transfer the Shares to Buyer free and
clear of all Encumbrances, and Buyer will purchase the Shares from Sellers.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for
the Shares will be $28,500,000 reduced or increased by the Adjustment Amount as
set forth in Sections 2.5 and 2.6.
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2.3 CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place simultaneously with the execution and delivery of
this Agreement at the offices of Buyer's counsel at Xxx Xxxxxxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxxxxxx 00000.
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed
(or accompanied by duly executed stock powers), for transfer to Buyer in form
and substance satisfactory to Buyer;
(ii) releases in the form of Exhibit 2.4(a)(ii) attached
hereto executed by each of the Sellers (collectively, "Sellers' Releases");
(iii) employment and non-competition agreements in the form
of Exhibit 2.4(a)(iii) attached hereto, executed by, Xxxx X. Xxxxx and Xxxx X.
Xxxxxxx (collectively, "Employment and Non-Competition Agreements");
(iv) a consulting and non-competition agreement in the
form of Exhibit 2.4(a)(iv) attached hereto, executed by Xxxxxxx X. Xxxx (the
"Consulting and Non-Competition Agreement");
(v) releases in the form of Exhibit 2.4(a)(v) attached
hereto executed by Xxxxx X. Xxxxx and each of the Sellers, respectively, with
the regard to any rights or claims under the Deferred Compensation Agreements;
(vi) a receipt and release in the form of Exhibit
2.4(a)(vi) attached hereto executed by the Sole Former Shareholder;
(vii) an opinion of Fried, Frank, Harris, Xxxxxxx &
Xxxxxxxx, dated the Closing Date, in the form of Exhibit 2.4(a)(vii) attached
hereto;
(viii) executed resignations, effective as of the Closing
Date of each officer and director of the Company;
(ix) the Disclosure Letter executed by Sellers;
(x) copies of all notices and Consents required pursuant
to Section 3.2(b) of the Agreement and that have been obtained prior to Closing;
(xi) all books of account, minute books, stock record
books, and other records of the Company then in the possession of Sellers or
their Representatives;
(xii) copies of the Company's Organizational Documents,
certified by a Secretary or Assistant Secretary of the Company to be true,
correct, complete and in full force and effect and unmodified as of the Closing
Date; a complete list of the officers and directors of the Company, certified by
a Secretary or Assistant Secretary of the Company to be true and correct as of
the Closing Date; a long form certificate of good standing from the Secretary of
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State of the State of Delaware showing all documents filed in such office with
regard to the Company; tax clearance certificates and good standing certificates
from the Secretary of the State Corporation Commission of the Commonwealth of
Virginia and the Secretary of State of the States of California, Hawaii and
South Carolina; copies of resolutions adopted by the Board of Directors of the
Company with respect to the Contemplated Transactions, certified by a Secretary
or Assistant Secretary of the Company to be true, correct, complete and in full
force and effect and unmodified as of the Closing Date; and
(xiii) such other certificates, agreements and other
documents as the Buyer may reasonably request.
(b) Buyer will deliver:
(i) to Sellers, the aggregate sum of $22,650,000, by wire
transfer in immediately available funds of the amount and to the account set
forth opposite the name of each Seller on Schedule 2.4(b)(i) attached hereto;
(ii) to the Escrow Agent, the sum of $5,850,000 to the
Escrow Agent, subject to the requirements of the Escrow Agreement, by bank
cashier's or certified check or wire transfer to an account specified by the
Escrow Agent;
(iii) an opinion of Day, Xxxxx & Xxxxxx LLP, dated the
Closing Date, in the form of Exhibit 2.4(b)(iii) attached hereto, addressing the
due authorization of the Agreement by, and the enforceability of the Agreement
against, Buyer; and
(iv) the Employment and Non-Competition Agreements and the
Consulting and Non-Competition Agreement, each executed by the Company.
(c) Buyer and Sellers will enter into an escrow agreement in the form
of Exhibit 2.4(c) attached hereto (the "Escrow Agreement") with Branch Banking
and Trust Company of Virginia (the "Escrow Agent").
(d) Buyer will pay in full the amounts owed to Branch Banking and Trust
Company of Virginia in accordance with Section 2.7(c).
(e) All of the transactions to be concluded at the Closing shall be
deemed concluded simultaneously. Unless waived, no transaction or delivery shall
be deemed finally concluded unless and until all such transactions are
concluded.
(f) Buyer's delivery of the funds via wire transfer in the amounts and
to the accounts specified in Section 2.4(b) shall, to the extent of the funds so
delivered and subject to the terms of the Escrow Agreement, fully and finally
discharge the obligation of Buyer with regard to the payment to Sellers of the
Purchase Price.
(g) Buyer and Sellers will deliver the completed and signed Form 8023
pursuant to the requirements of Section 5.2.
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2.5 ADJUSTMENT AMOUNT. The Adjustment Amount (which may be a
positive or negative number) will be equal to (a) the Net Book Value of the
Company as of the Closing Date determined in accordance with Section 2.6 and
GAAP, minus (b) Net Book Value as shown on the December 31, 2001 Balance Sheet.
2.6 ADJUSTMENT PROCEDURE.
(a) Sellers will prepare or cause to be prepared, on a basis consistent
with the customary method used in the preparation of the Company's month end
financial statements, unaudited consolidated financial statements ("Closing
Financial Statements") of the Company as of the Closing Date in accordance with
GAAP applied on a consistent basis for the period from January 1, 2002 through
the Closing Date, including a computation of Net Book Value as of the Closing
Date. The fees and expenses of Sellers (including the fees and expenses of
Sellers' counsel, accountants, brokers, investment bankers, financial advisors,
representatives and other agents), to the extent paid or to be paid by Company
as permitted hereunder, shall be reflected either as a reduction in cash or as a
liability in the Closing Financial Statements, and no fees or expenses of
Sellers shall be paid by the Company after the Closing that are not reflected as
liabilities on the Closing Financial Statements. Sellers will deliver to Buyer
within thirty days after the Closing Date (i) consolidated financial statements
for the most recently completed fiscal year ending December 31, 2002 in an SEC
reporting format together with an unqualified audit opinion of the Sellers'
accountants that the statements present fairly the financial condition and the
results of operations, changes in stockholders' equity and cash flows of the
Company for the period and have been prepared in accordance with GAAP applied on
a consistent basis (the "2002 Audited Financial Statements"), and (ii) the
Closing Financial Statements, which financial statements will fairly present and
reflect the financial condition and the results of operations, changes in
stockholders' equity, and cash flows of the Company for the period then ended
and will have been prepared in accordance with GAAP applied on a consistent
basis. If within thirty days following Buyer's receipt of the Closing Financial
Statements, Buyer has not given Sellers notice of its objection to the Closing
Financial Statements (such notice must contain a statement of the basis of
Buyer's objection), then the Net Book Value reflected in the Closing Financial
Statements will be used in computing the Adjustment Amount. If Buyer gives such
notice of objection and Buyer and the Sellers cannot agree with regard to such
objection within 14 days thereafter, then the issues in dispute will be
submitted to nationally recognized certified public accountants mutually agreed
upon by the parties (which have not been engaged by either party or their
respective subsidiaries or affiliates for at least two years prior to the date
of delivery to Buyer of the Closing Financial Statements) (the "Independent
Accountants"), for resolution. If issues in dispute are submitted to the
Independent Accountants for resolution, (i) within 15 business days after
request, each party will furnish to the Independent Accountants such work papers
and other documents and information relating to the disputed issues as the
Independent Accountants may request and are available to that party (or its
independent public accountants), and will be afforded the opportunity to present
to and discuss with the Independent Accountants any material relating to the
dispute prior to the Independent Accountants' determination; (ii) the
determination by the Independent Accountants, as set forth in a notice delivered
to Buyer and the Sellers by the Independent Accountants, will be binding and
conclusive on parties in the absence of manifest error; and (iii) the fees and
disbursements of the Independent Accountants shall be allocated between Buyer
and Sellers so that Buyer's share of such fees and disbursements shall be in the
same proportion that the aggregate amount of the Adjustment Amount based on the
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disputed Closing Financial Statements that is unsuccessfully disputed by Buyer
(as finally determined by the Independent Accountants) bears to the total amount
of such Adjustment Amount.
(b) On the tenth business day following the final determination of the
Adjustment Amount, if the Purchase Price (after consideration of the Adjustment
Amount) is greater than the aggregate of the payments made pursuant to Sections
2.4(b)(i) and 2.4(b)(ii), Buyer will pay the difference to Sellers, and if the
Purchase Price (after consideration of the Adjustment Amount) is less than such
aggregate amount, Sellers will pay the difference to Buyer. All payments will be
made together with simple interest at a rate equal to the rate on U.S. Treasury
Bills with a maturity of three months, as reported in the Wall Street Journal
for the Closing Date, beginning on the Closing Date and ending on the date of
payment. Payments shall be made in immediately available funds. The Purchase
Price shall be the Purchase Price as adjusted by the Adjustment Amount. Payments
to Sellers shall be made in the manner and shall be allocated in the proportions
set forth in Section 2.4(b)(i). Payments to Buyer shall be made by wire transfer
to such bank account as Buyer will specify. Any good faith dispute in the
calculation of the Adjustment Amount will not constitute a breach of any of the
representations or warranties of either Buyer or Sellers hereunder and will not
give either party any right to indemnification hereunder. Within thirty business
days of Buyer's receipt from Sellers of an invoice from the Company's
accountants, Buyer shall pay an additional amount to Sellers equal to the
incremental cost required by the Company's accountants to prepare the 2002
Audited Financial Statements in accordance with SEC requirements.
2.7 CERTAIN PAYMENTS.
(a) On or prior to the Closing Date, Sellers shall cause the Company to
pay in full any and all amounts payable under the Deferred Compensation
Agreements as a result of the Contemplated Transactions and to terminate the
Deferred Compensation Agreements in accordance with the requirements of each
Deferred Compensation Agreement. The termination of the Deferred Compensation
Agreements shall cause a reduction in the net assets of the Company for purposes
of determining Net Asset Value to the extent that the payments made with respect
to the termination of such agreements exceed the amount of deferred compensation
shown on the December 31, 2001 Balance Sheet of the Company with respect to such
Deferred Compensation Agreements.
(b) On or prior to the Closing Date, Sellers shall cause the Company to
pay, all amounts then outstanding (including principal, accrued interest, fees
and other charges) under that certain Subordinated Promissory Note, dated as of
December 22, 2000, issued by the Company in favor of the Sole Former
Shareholder, and all other amounts payable by the Company to the Sole Former
Shareholder, as set forth on Schedule 2.7(b) attached hereto.
(c) On the Closing Date, Buyer will pay on behalf of the Company, or
cause the Company to pay, all amounts then outstanding (including principal,
accrued interest, fees and other charges) under (i) that certain Business Loan
and Security Agreement, dated as of December 22, 2000, by and between the
Company, as borrower, and Branch Banking and Trust Company of Virginia, as
lender, (ii) that certain Mortgage Loan by and between the Company, as borrower,
and Branch Banking and Trust Company of Virginia, as lender, and (iii) that
certain
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Equipment Term Loan by and between the Company, as borrower, and Branch
Banking and Trust Company of Virginia, as lender, as set forth on Schedule
2.7(c) attached hereto.
2.8 WAIVER OF RIGHT OF FIRST REFUSAL. The Company's Certificate of
Incorporation limits the Sellers' ability to sell or transfer the Shares in that
the Company and all of the Sellers have a right of first refusal to purchase the
Shares if any Seller offers to sell such Shares to a third party. The Sellers
hereby waive their respective rights of first refusal with respect to the
Contemplated Transactions.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. Section 3.1(a) of the
Disclosure Letter contains a complete and accurate list of the Company's
jurisdiction of incorporation and other jurisdictions in which it is authorized
to do business. The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. The Company
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect. Sellers
have delivered to Buyer copies of the Organizational Documents of the Company,
as currently in effect. The Company has no subsidiaries.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation
of Sellers, enforceable against Sellers in accordance with its terms. Upon the
execution and delivery by each Seller, as applicable, of the Ancillary
Agreements to which such Seller is a party, such Seller's endorsement of the
certificates evidencing the Shares owned by such Seller (or the executed stock
power accompanying such certificates), and each other agreement, certificate or
document executed by or on behalf of such Seller and delivered to Buyer pursuant
to this Agreement (collectively, the "Sellers' Closing Documents"), and assuming
the due authorization, execution and delivery thereof by the other parties
thereto, the Sellers' Closing Documents to which such Seller is a party will
constitute the legal, valid, and binding obligations of such Seller, enforceable
against such Seller in accordance with their respective terms. Each Seller has
the absolute and unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and the Sellers' Closing Documents to which he is a
party and to perform his obligations hereunder and thereunder.
(b) Except as set forth in Section 3.2(b) of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
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(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a violation
of any Legal Requirement or any Order to which the Company or any Seller, or any
of the assets owned or used by the Company, may be subject, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief thereunder;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) other than as contemplated by Section 6.11(d), cause
Buyer or the Company to become subject to, or to become liable for the payment
of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by the
Company.
Except as set forth in Section 3.2(b) of the Disclosure Letter, neither
the Sellers nor the Company is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consist of 3,000 shares
of common stock, no par value per share, of which 500 shares are issued and
outstanding and constitute the Shares. Sellers are the record and beneficial
owners and holders of the Shares, free and clear of all Encumbrances other than
Permitted Liens. On the Closing Date, the Sellers will be the record and
beneficial owners and holders of the Shares, free and clear of all Encumbrances,
other than those which are to be released at Closing. The Shares constitute all
of the issued and outstanding equity securities of the Company and each Seller
is the sole record and beneficial owner of that portion of the Shares set forth
after his name on Section 3.3(a) to the Disclosure Letter as evidenced by the
share certificates identified by number as set forth in said Section 3.3(a). All
of the outstanding equity securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. Neither the issue nor
sale of any equity securities of the Company violated the pre-emptive rights of
any Person. Except as set forth in Section 3.3 of the
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Disclosure Letter, no Person has owned or held any equity securities of the
Company at anytime prior to the date hereof, other than the Sellers and the Sole
Former Shareholder. All of the Shares heretofore owned by Sellers have been, or
shall be at the Closing, duly endorsed for transfer to Buyer or are, or shall be
at the Closing, accompanied by duly executed stock powers.
(b) Sellers are not party to any voting trust, proxy or other
agreements or understandings with respect to the voting of any of the Shares.
Section 3.3(b) of the Disclosure Letter contains a complete and accurate list,
and the Seller has heretofore delivered or made available to Buyer a true and
complete copy of, each power of attorney that is currently effective and
outstanding granted by the Seller with respect to any of the Shares. There are
no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in violation of the
Securities Act or any other Legal Requirement. The Company neither owns, nor has
any Contract to acquire, any equity securities or other securities of any Person
or any direct or indirect equity or ownership interest in any other business.
All dividends and distributions by the Company have been made in compliance with
the Organizational Documents of the Company and all Legal Requirements.
3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a)
audited balance sheets of the Company as of December 31 in each of the years
1999, 2000 and 2001, and the related audited statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
together with the related notes and unqualified report thereon of Xxxxxxx &
Company, independent certified public accountants, and (b) an unaudited balance
sheet of the Company as at December 31, 2002 (including the notes thereto, the
"Balance Sheet"), and the related consolidated statements of income, changes in
stockholders' equity, and cash flow for the year then ended. Such financial
statements and notes fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Company as of
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP applied on a consistent basis. The
audited and unaudited financial statements described in this Section 3.4 are
collectively referred to as the "Financial Statements". The unaudited financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Company's financial condition at
December 31, 2002 and the results of its operations for the year then ended. No
financial statements of any Person other than the Company are required by GAAP
to be included in the consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices and the requirements of Section
13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless of
whether or not the Company is subject to that Section), including the
maintenance of an adequate system of internal controls. The minute books of the
Company contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Boards of Directors, and
committees of the Boards of Directors of the Company, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of the
Company.
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3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Section 3.6 of the
Disclosure Letter contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by the Company. Sellers have
delivered or made available to Buyer copies of the deeds and other instruments
(as recorded) by which the Company acquired such real property and interests,
and copies of all title insurance policies, opinions, abstracts, and surveys in
the possession of Sellers or the Company and relating to such property or
interests. The Company owns (with good and marketable title in the case of real
property, subject only to Permitted Liens) all of the properties and assets
(whether real, personal, or mixed and whether tangible or intangible) that they
purport to own located in the facilities owned or operated by the Company or
reflected as owned in the books and records of the Company, including all of the
properties and assets reflected in the Financial Statements (except for assets
held under capitalized leases disclosed or not required to be disclosed in
Section 3.6 of the Disclosure Letter and personal property sold since the date
of the Balance Sheet, as the case may be, in the Ordinary Course of Business),
and all of the properties and assets purchased or otherwise acquired by the
Company since the date of the Balance Sheet (except for personal property
acquired and sold since the date of the Balance Sheet in the Ordinary Course of
Business and consistent with past practice), which subsequently purchased or
acquired properties and assets (other than inventory and short-term investments)
are listed in Section 3.6 of the Disclosure Letter. All material properties and
assets reflected in the Financial Statements are free and clear of all
Encumbrances except for Permitted Liens and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) mortgages or security interests shown on the
Balance Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the Balance
Sheet (such mortgages and security interests being limited to the property or
assets so acquired and the proceeds derived therefrom), with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (c) liens for current taxes not yet due and payable, (d) with
respect to real property, (i) minor imperfections of title, if any, none of
which is substantial in amount, materially detracts from the value or impairs
the use of the property subject thereto, or impairs the operations of the
Company, (ii) zoning laws and other land use restrictions that do not impair the
present or anticipated use of the property subject thereto, and (iii) those
liens listed as exceptions to the title policies, and (e) those liens listed in
Section 3.6 of the Disclosure Letter (the liens in subclauses (a) through (e)
are collectively referred to herein as the "Permitted Liens"). All buildings,
plants, and structures owned by the Company lie wholly within the boundaries of
the real property owned by the Company and do not encroach upon the property of,
or otherwise conflict with the property rights of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings, plants,
offices, structures, and equipment owned by the Company are structurally sound,
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings, plants, offices,
structures, or equipment owned by the Company is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. To Sellers' Knowledge, the building, plants,
offices, structures, and equipment owned or leased by the Company are sufficient
for the continued conduct of the Company's businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
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3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
that are reflected on the Financial Statements or on the accounting records of
the Company as of the Closing Date (collectively, the "Accounts Receivable")
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. The Accounts Receivable
are current and collectible net of the respective reserves shown on the
Financial Statements or on the accounting records of the Company as of the
Closing Date (which reserves are adequate and calculated consistent with past
practice and will not represent a material adverse change in the composition of
such Accounts Receivable in terms of aging). Subject to such reserves, each of
the Accounts Receivable either has been or will be collected in full, without
any set-off, within one hundred and twenty days after the day on which it first
becomes due and payable (not including any amounts not yet due under fixed price
contracts and retainages not yet due for payment under Government Contracts).
There is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Section 3.8 of the Disclosure Letter contains a complete and accurate list of
all Accounts Receivable as of the date of the Balance Sheet, which list sets
forth the aging of such Accounts Receivable.
3.9 INVENTORY. The Company has no inventory.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Section
3.10 of the Disclosure Letter, the Company has no liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent,
or otherwise) except for (i) liabilities or obligations reflected or reserved
against in the Balance Sheet, (ii) liabilities or obligations arising in the
Ordinary Course of Business under Contracts described in the Disclosure Letter
and (iii) current liabilities incurred in the Ordinary Course of Business since
the respective dates thereof.
3.11 TAXES.
(a) The Company has filed or caused to be filed (on a timely basis
since its inception) all Tax Returns that are or were required to be filed by or
with respect to the Company, pursuant to applicable Legal Requirements. Sellers
have delivered to Buyer copies of, and Section 3.11(a) of the Disclosure Letter
contains a complete and accurate list of, all such Tax Returns relating to
income or franchise taxes filed since the Company's inception. The Company has
paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Sellers or the Company, except such Taxes, if any, as are
listed in Section 3.11(a) of the Disclosure Letter and are being contested in
good faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Financial Statements. No notice has been
received by the Company and, to Sellers' Knowledge, no claim has ever been made
by a Governmental Authority in a jurisdiction where the Company does not file
Tax Returns that it may be subject to Taxes in that jurisdiction. Except as
described in Section 3.11 of the Disclosure Letter, the Company is not a partner
in any partnership and is not a party to any joint ventures. Except as set forth
in Section 3.11 of the Disclosure Letter, the Company has not requested or
received any legal or accounting opinions relating to the Company's position on
any Tax Return. Except as set forth in Section 3.11 of the Disclosure Letter,
the Company has not requested or received a revenue ruling, private letter
ruling, or similar or related correspondence from the IRS.
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(b) The United States federal and state income Tax Returns of the
Company subject to such Taxes have been audited by the IRS or relevant state tax
authorities or are closed by the applicable statute of limitations for all
taxable years through 1998. Section 3.11(b) of the Disclosure Letter contains a
complete and accurate list of all audits of all such Tax Returns of the Company,
including a reasonably detailed description of the nature and outcome of each
audit and a schedule of all pending audits and contests of liability for Taxes.
All deficiencies proposed, assessed or determined as a result of such audits
have been paid, reserved against, settled, or, as described in Section 3.11(b)
of the Disclosure Letter, are being contested in good faith by appropriate
proceedings. Section 3.11(b) of the Disclosure Letter describes all adjustments
to the United States federal income Tax Returns filed by the Company for all
taxable years since inception, and the resulting deficiencies proposed by the
IRS. Except as described in Section 3.11(b) of the Disclosure Letter, neither
the Sellers nor the Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of Taxes of
the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of the Company are adequate (determined in accordance with
GAAP) and are at least equal to the Company's liability for Taxes. There exists
no proposed tax assessment against the Company except as disclosed in the
Financial Statements or in Section 3.11(c) of the Disclosure Letter. No consent
to the application of Section 341(f)(2) of the IRC has been filed with respect
to any property or assets held, acquired, or to be acquired by the Company.
(d) All Taxes that the Company is or was required by Legal Requirements
to withhold or collect has been duly withheld or collected and, to the extent
required, has been paid to the proper Governmental Body or other Person,
including, but not limited to, amounts paid to any employee or any foreign
person or entity, and any back-up withholding required under IRC Section 3406.
(e) All Tax Returns filed by the Company are true, correct, and
complete. There is no tax sharing agreement, including any agreement for
indemnification, that will require any payment by the Company after the date of
this Agreement. The Company has been a validly electing S corporation within the
meaning of IRC Sections 1361 and 1362 at all times since January 1, 2001, and
the Company will be an S corporation up to and including the Closing.
(f) Section 3.11(f) of the Disclosure Letter lists those states in
which the Company has made valid state tax elections to be treated as an S
corporation or comparable pass-through entity and lists those states in which
the Company is not treated as a pass-through entity for state tax purposes.
(g) The Company has not in the past 10 years (i) acquired assets from
another corporation in a transaction in which the Company's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor or (ii) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.
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(h) The Company is not party to any agreement, contract or arrangement
that has resulted or would result in the payment of any "excess parachute
payment" within the meaning of IRC Section 280G.
(i) To the Sellers' Knowledge, the Company has not participated,
directly or indirectly, in any transaction that would constitute a reportable
transaction or listed transaction both as defined in Temp. Reg. 1.6011-4T, or in
any transaction that is a tax shelter within the meaning of IRC Section
6662(d)(2)(C)(iii).
3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance
Sheet, there has not been (i) any change in the business, operations,
properties, assets, condition or, to the Sellers' Knowledge, prospects of the
Company, and (ii) no event has occurred or circumstance exists that could
reasonably be expected to result in a Material Adverse Effect.
3.13 EMPLOYEE BENEFITS.
(a) Section 3.13(a) of the Disclosure Letter sets forth a true and
complete list of each employee benefit plan (within the meaning of Section 3(3)
of ERISA), arrangement or agreement that is maintained or contributed to as of
the date of this Agreement, or that has within the last six years been
maintained or contributed to, by the Company or any other entity which together
with the Company would be deemed a "single employer" within the meaning of
Section 4001 of ERISA or IRC Sections 414(b), (c), (m) or (o) (an "ERISA
Affiliate") or under which the Company or any ERISA Affiliate has any liability
(collectively, the "Plans").
(b) The Company has heretofore delivered or made available to Buyer
true, correct and complete copies of each of the Plans and all related
documents, including but not limited to (i) the most recent determination letter
from the IRS (if applicable) for such Plan, (ii) any current summary plan
description and any summaries of material modification, (iii) all annual reports
(Form 5500 series) for each Plan filed for the preceding three plan years, (iv)
all agreements with fiduciaries and service providers relating to the Plan, and
(v) all substantive correspondence relating to any such Plan addressed to or
received from the IRS, the Department of Labor, the Pension Benefit Guaranty
Corporation or any other governmental agency.
(c) Except as set forth at Section 3.13(c) of the Disclosure Letter,
(i) each of the Plans has been operated and administered in all material
respects in compliance with applicable Legal Requirements, including but not
limited to ERISA and the IRC, (ii) each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the IRC is so qualified, (iii) no Plan
is subject to Title IV of ERISA, (iv) no Plan provides benefits, including,
without limitation, death or medical benefits (whether or not insured), with
respect to current or former employees of the Company beyond their retirement or
other termination of service, other than (w) coverage mandated by applicable
Legal Requirements, (x) death benefits or retirement benefits under a Plan that
is an "employee pension plan," as that term is defined in Section 3(2) of ERISA,
(y) deferred compensation benefits under a Plan that are accrued as liabilities
on the books of the Company, or (z) benefits the full cost of which is borne by
the current or former employee (or his beneficiary), (v) all Plans (other than
Plans providing for the payment of benefits from the general assets of the
Company) could be terminated as of the Closing Date without material liability,
(vi) no Plan is a "multiemployer plan" (as such term is defined in Section 3(37)
of
- 20 -
ERISA), (vii) all contributions or other amounts payable by the Company as of
the Closing Date with respect to each Plan and all other liabilities of each
such entity with respect to each Plan in respect of current or prior plan years
have been paid or accrued in accordance with generally accepted accounting
practices and Section 412 of the IRC, (vii) the Company has not engaged in a
transaction in connection with which the Company is subject to either a material
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material
tax imposed pursuant to Section 4975 or 4976 of the IRC, (ix) to the Knowledge
of Sellers, there are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the Plans or any
trusts related thereto, (x) no Plan, program, agreement or other arrangement,
either individually or collectively, provides for any payment by the Company
that would not be deductible under IRC Sections 162(a)(1), 162(m) or 404, and
(xi) no Plan has experienced a "reportable event" (as such term is defined in
Section 4043(c) of ERISA) that is not subject to an administrative or statutory
waiver from the reporting requirement.
(d) Except as set forth at Section 3.13(d) of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby (either alone or in conjunction with any other
event) will (i) restrict or prohibit the Company from amending any Plan, (ii)
result in any material payment (including, without limitation, severance,
unemployment compensation, "excess parachute payment" (within the meaning of
Section 280G of the IRC), forgiveness of indebtedness or otherwise) becoming due
to any director, officer or employee of the Company under any Plan or otherwise,
(iii) materially increase any benefits otherwise payable under any Plan or (iv)
result in any acceleration of the time of payment or vesting of any benefits
under any Plan or otherwise.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Section 3.14(a) of the Disclosure Letter:
(i) the Company is, and at all times since January 1,
1998 has been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the Company to comply
with, any Legal Requirement, or (B) may give rise to any obligation on the part
of the Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(iii) the Company has not received, at any time since
January 1, 1998, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply with, any
Legal Requirement, or (B) any actual, alleged, possible, or potential obligation
on the part of the Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature and the Company is not subject to any
liability or obligation with respect to any remedial action resulting from an
event or notice which the Company received prior to January 1, 1998.
- 21 -
(b) Section 3.14(b) of the Disclosure Letter contains a complete and
accurate list of each material Governmental Authorization that is held by the
Company or that otherwise relates to the business of, or to any of the assets
owned or used by, the Company. Each Governmental Authorization listed or
required to be listed in Section 3.14(b) of the Disclosure Letter is valid and
in full force and effect. Except as set forth in Section 3.14(b) of the
Disclosure Letter:
(i) the Company is, and at all times since January 1,
1998 has been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Section
3.14(b) of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed in Section
3.14(b) of the Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Section 3.14(b) of the Disclosure Letter;
(iii) the Company has not received, at any time since
January 1, 1998, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of or failure to comply with any term
or requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Section 3.14(b) of the Disclosure Letter have been duly filed on a timely basis
with the appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Section 3.14(b) of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate its business in
the manner it currently conducts and operates such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Section 3.15(a) of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
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To the Knowledge of Sellers and the Company, (1) no such Proceeding has
been threatened, and (2) no event has occurred or circumstance exists that could
reasonably be expected to give rise to or serve as a basis for the commencement
of any such Proceeding. Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in
Section 3.15(a) of the Disclosure Letter. The Proceedings listed in Section
3.15(a) of the Disclosure Letter will not have a material adverse effect on the
business, operations, assets, condition or, to the Sellers' Knowledge, prospects
of the Company.
(b) Except as set forth in Section 3.15(b) of the Disclosure Letter:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) Seller is not subject to any Order that relates to
the business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the
Company is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company.
(c) Except as set forth in Section 3.15(c) of the Disclosure Letter:
(i) the Company is, and at all times since January 1,
1998 has been, in full compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) the Company has not received, at any time since
January 1, 1998, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding any actual, alleged,
possible, or potential violation of, or failure to comply with, any term or
requirement of any Order to which the Company, or any of the assets owned or
used by the Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Section 3.16 of the Disclosure Letter, since the date of the Balance Sheet, the
Company has conducted its business only in the Ordinary Course of Business and
there has not been any:
(a) change in the Company's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the Company;
grant of any phantom or similar rights which give any Person any interest in any
portion of the revenue or earnings of the Company; issuance of any security
convertible into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by the Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
- 23 -
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(d) retirement, resignation, or other termination of the employment of
any key employee nor any notice or notification regarding any intended
retirement, resignation, or other termination of the employment of any key
employee;
(e) except as required by applicable Legal Requirements or to maintain
qualification pursuant to the IRC, any adoption, amendment, renewal or
termination of any Plan or any agreement, arrangement, plan or policy between
the Company and one or more of its current or former directors, officers or
employees, or any non-deductible contribution to any Plan;
(f) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition or, to the Sellers'
Knowledge, prospects of the Company, taken as a whole;
(g) entry into, termination of, or receipt of formal or informal notice
or advice of termination of (i) any material license, distributorship, dealer,
sales representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least $100,000;
(h) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
(i) cancellation or waiver of any claims or rights with a value to the
Company in excess of $100,000;
(j) material change in the accounting methods used by the Company; or
(k) agreement, whether oral or written and whether formal or informal,
by the Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(a) Section 3.17(a) of the Disclosure Letter contains a complete and
accurate list, including the parties to the contract and, with respect to the
contracts disclosed pursuant to subsection (a)(i) below, the remaining contract
ceiling and funded backlog of each such contract, and Sellers have delivered or
made available to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount or value
in excess of $100,000;
- 24 -
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount or value
in excess of $100,000;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or receipts by
the Company in excess of $50,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $50,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable
Contract, other than licensing agreements with respect to commonly available
software programs with a value, in the aggregate, of less than $50,000 under
which the Company is the licensee, with respect to patents, trademarks,
copyrights, or other intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets.
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any Affiliate of
the Company to engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than direct payments
for goods;
(x) each power of attorney that is currently effective
and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in
excess of $50,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company; and
(xiv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
- 25 -
(b) Except as set forth in Section 3.17(b) of the Disclosure Letter:
(i) None of the Sellers (and no Related Person of Seller)
has or may acquire any rights under or has or may become subject to any
obligation or liability under, any Contract that relates to the business of, or
any of the assets owned or used by, the Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(c) To Sellers' Knowledge, except as set forth in Section 3.17(c) of
the Disclosure Letter, each Contract identified or required to be identified in
Section 3.17(a) of the Disclosure Letter is in full force and effect and is
valid and enforceable in accordance with its terms.
(d) Except as set forth in Section 3.17(d) of the Disclosure Letter:
(i) the Company is, and at all times since the date of
the respective Contract (including any Contracts which have been superseded by
the present Contracts) (A) has been, in full compliance in all material respects
with all applicable terms and requirements of each Contract under which the
Company has or had any obligation or liability or by which the Company or any of
the assets owned or used by the Company is or was bound, (B) has complied in all
respects with all Legal Requirements pertaining to each Contract, and (C) any
representations and certifications executed, acknowledged or set forth in or
pertaining to each Contract were complete and correct in all material respects
as of their effective date;
(ii) to Sellers' Knowledge, each other Person that has or
had any obligation or liability under any Contract under which the Company has
or had any rights is, and at all times since the inception of such contract has
been, in full compliance with all material terms and requirements of such
Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) could reasonably be expected to
contravene, conflict with, or result in a material violation or breach of, or
give the Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iv) the Company since the date of the respective Contract
(including any Contracts which have been superseded by the present Contracts),
has not given to or received from any other Person, any notice or other
communication (whether oral or written) regarding any actual, alleged, possible,
or potential violation or breach of, or default under, any material Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
- 26 -
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement. To Sellers' Knowledge, all active delivery orders under all such
Contracts can be completed at a profit, within the time specified therein,
utilizing only personnel now employed by and (other than the purchase of
inventory in the Ordinary Course of Business)assets now owned by the Company.
(g) Except as set forth in Section 3.17(g) of the Disclosure Letter:
(i) (A) the Company has complied with all terms and
conditions of each Government Contract or Government Subcontract in all material
respects, (B) the Company has complied in all respects with all Legal
Requirements or agreements pertaining to each Government Contract or Government
Subcontract and (C) all representations and certifications executed,
acknowledged or set forth in or pertaining to each Government Contract or
Government Subcontract were complete and correct in all respects as of their
effective date and the Company has complied in all respects with all such
representations and certifications;
(ii) (A) neither the U.S. Government nor any prime
contractor, subcontractor or other Person has notified the Company, either in
writing or orally, that the Company has breached or violated any Legal
Requirement, certification, representation, clause, provision or other
requirement pertaining to any Government Contract or Government Subcontract, (B)
no termination for convenience, termination for default, cure notice or show
cause notice is currently in effect pertaining to any Government Contract or
Government Subcontract, (C) no material cost incurred by the Company pertaining
to any Government Contract or Government Subcontract has been questioned or
challenged by representatives of the Administrative Contracting Officer or the
Defense Contract Audit Agency, has been disallowed by the U.S. Government, or
has been or now is, the subject of any investigation, and (D) no amount of money
due to the Company, pertaining to any Government Contract or Government
Subcontract has been withheld or set off nor has any claim been made to withhold
or set off money, and the Company is entitled to all progress payments received
with respect thereto;
(iii) (A) neither the Company nor any of its directors,
officers or employees, or, to the Sellers' Knowledge, its consultants or agents
is or during the past three years has been under administrative, civil or
criminal investigation, indictment or information by any Governmental Body with
respect to any alleged irregularity, misstatement or omission arising under or
relating to any Government Contract or Government Subcontract, and (B) during
the past five (5) years, the Company has not conducted or initiated any internal
investigation or made a voluntary disclosure to any Governmental Body with
respect to any alleged irregularity, misstatement or omission arising under or
relating to a Government Contract or Government Subcontract;
(iv) there exist (A) no outstanding claims against the
Company, either by any Governmental Body or by any prime contractor,
subcontractor, vendor or other Person, arising under or relating to any
Government Contract or Government Subcontract and (B) no material disputes
between the Company and any Governmental Body under the Contract Disputes Act or
- 27 -
any other federal statute or regulation or between the Company and any prime
contractor, subcontractor or vendor arising under or relating to any Government
Contract or Government Subcontract;
(v) the Company has no interest in any pending or
potential claim against any Governmental Body or any prime contractor,
subcontractor or vendor arising under or relating to any Government Contract or
Government Subcontract, and Section 3.17(g) of the Disclosure Letter lists each
Government Contract or Government Subcontract which is currently under audit by
any Governmental Body or any other person that is a party to such Government
Contract or Government Subcontract; and
(vi) the Company has not been debarred or suspended from
participation in the award of contracts with the DOD or any other Governmental
Body (excluding for this purpose ineligibility to bid on certain contracts due
to generally applicable bidding requirements), there exist no facts or
circumstances that would warrant suspension or debarment or the finding of
non-responsibility or ineligibility on the part of the Company, no payment has
been made by the Company or by any Person on behalf of the Company in connection
with any Governmental Contract or Governmental Subcontract in violation of
applicable procurement Legal Requirements or in violation of, or requiring
disclosure pursuant to, the Foreign Corrupt Practices Act, and the Company's
cost accounting and procurement systems and the associated entries reflected in
the Company's financial records with respect to the Government Contracts and
Government Subcontracts are in compliance in all material respects with all
Legal Requirements.
3.18 INSURANCE.
(a) Sellers have delivered, disclosed to or made available to Buyer:
(i) true and complete copies of all policies of insurance
to which the Company is a party or under which the Company, or any director of
the Company is covered;
(ii) true and complete copies of all pending applications
for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
(b) Section 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
(iii) all material obligations of the Company to third
parties with respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such coverage is
provided.
- 28 -
(c) Section 3.18(c) of the Disclosure Letter sets forth, by year, for
the current policy year and each of the five preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost of such
claims.
(d) Except as set forth in Section 3.18(d) of the Disclosure Letter:
(i) All policies to which the Company is a party or that
provide coverage to the Sellers, the Company, or any director or officer of the
Company:
(A) are valid, outstanding, and enforceable;
(B) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a
party or by which it is bound;
(C) will continue in full force and effect following
the consummation of the Contemplated Transactions;
and
(D) do not provide for any retrospective premium
adjustment or other experienced-based liability on
the part of the Company.
(ii) Neither the Seller nor the Company has received (A)
any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its respective obligations, under each policy to
which the Company is a party or that provides coverage to the Company or
director thereof.
(iv) The Company has given notice to the insurer of all
claims that may be insured thereby.
- 29 -
3.19 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.19 of
the disclosure letter:
(a) To Sellers' Knowledge, the Company is, and at all times has been,
in full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law except where any such noncompliance, violation or
liability would not have a Material Adverse Effect. None of the Sellers, either
individually or collectively, has any basis to suspect, nor has any of them
received, any actual or threatened Order, notice, citation, inquiry, warning or
other communication that relates to: (i) Hazardous Activity; (ii) Hazardous
Materials; (iii) any alleged, actual or potential violation or failure to comply
with any Environmental Law; or (iv) any alleged, actual or potential obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities, with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which the Company has had an
interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by the Company or any other Person for whose conduct it is or may be
held responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received. To Sellers' Knowledge, no other person for
whose conduct the Company is or may be held responsible has received any such
actual or threatened Order, notice, citation, inquiry, warning or other
communication;
(b) To Sellers' Knowledge, there are no pending or threatened claims,
Encumbrances, or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or any
other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest;
(c) None of the Sellers has any basis to expect, nor has any of them or
any other Person for whose conduct they are or may be held responsible, received
any citation, directive, inquiry, notice, Order, summons, warning, or other
communication from (i) any Governmental Body, including those administering or
enforcing any Environmental Law, or (ii) the owner of any real property or other
facility, that relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which any Seller or the Company had an interest;
(d) To Sellers' Knowledge, None of the Sellers, or any other Person for
whose conduct they are or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or with respect to
any other properties and assets (whether real, personal, or mixed) in which the
Company (or any predecessor), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such other
property or assets except liabilities which will not result in a Material
Adverse Effect;
(e) To Sellers' Knowledge, there are no Hazardous Materials present on
or in the Environment at the Facilities or at any geologically or hydrologically
connected property, including any Hazardous Materials contained in barrels,
above or underground storage tanks, landfills, land deposits, dumps, equipment
(whether moveable or fixed) or other containers,
- 30 -
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon except such Hazardous Materials, if any,
the presence of which will not have a Material Adverse Effect. None of Sellers
and the Company, nor any other Person for whose conduct they are or may be held
responsible, or any other Person, has permitted or conducted, or is aware of,
any Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which the Company has
or had an interest except in full compliance with all applicable Environmental
Laws;
(f) To the Sellers' Knowledge, there has been no Release or Threat of
Release, of any Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the Facilities,
or from or by any other properties and assets (whether real, personal, or mixed)
in which the Company has or had an interest, or any geologically or
hydrologically connected property, whether by Sellers, the Company, or any other
Person; and
(g) The Company has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by Sellers, the Company, or any other Person for whose conduct they are or may
be held responsible, with Environmental Laws.
3.20 EMPLOYEES.
(a) Section 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of the
Company, including each employee on leave of absence or layoff status: name; job
title; current compensation paid or payable and any change in compensation since
January 1999; vacation accrued; and service credited for purposes of vesting and
eligibility to participate under the Company's Plans.
(b) No officer or director and to Seller's Knowledge no employee of the
Company is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or proprietary rights agreement,
between such employee, officer or director and any other Person ("Proprietary
Rights Agreement") that in any way adversely affects or will affect (i) the
performance of his duties as an employee, officer or director of the Company, or
(ii) the ability of the Company to conduct its business, including any
Proprietary Rights Agreement with Sellers or the Company by any such employee,
officer or director. To Sellers' Knowledge, and with the exception of Xxxxxxx X.
Xxxx no director, officer, or other key employee of the Company intends to
terminate his employment with the Company.
(c) No former or current employees of the Company have executed written
confidentiality and noncompete Contracts with the Company.
(d) Except as set forth in Section 3.20(d) of the Disclosure Letter and
subject to any applicable requirements under the Worker Adjustment and
Retraining Notification Act (29 USCS Sections 2101 et seq.) or similar state
laws, all employees of the Company are employed by the
- 31 -
Company on an "at will" basis and may be terminated at any time without notice
or payment of consideration or penalty by the Company.
3.21 LABOR RELATIONS; COMPLIANCE. The Company has not been a party
to any collective bargaining or other labor Contract. With respect to any group
or unit of employees of the Company, whether by division, department, employment
site, pay code (such as hourly-paid or salaried), or job/work status code, (a)
there has not been, there is not presently pending or existing, and to Sellers'
Knowledge there is not threatened, (i) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (ii) any Proceeding against or
affecting the Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting the Company or its premises, or (iii) any application for
certification of a collective bargaining agent; (b) no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute; and(c) there is no lockout of any employees by the Company, and
no such action is contemplated by the Company. The Company has complied in all
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. The Company is not liable for the payment
of any compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets. The term "Intellectual Property
Assets" includes:
(i) the name Darlington Inc., all fictional business
names, trading names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
(iv) all web sites, web pages, internet addresses and
internet domain names used by the Company (collectively, "Web Sites"); and
(v) all trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets"); owned, used, or
licensed by the Company as licensee or licensor or used by the Company in the
operation of the Company's business as it is currently conducted.
(b) Agreements. Section 3.22(b) of the Disclosure Letter contains a
complete and accurate list and summary description, including any royalties paid
or received by the Company, of all material Contracts relating to the
Intellectual Property Assets to which the Company is a
- 32 -
party or by which the Company is bound, except for any license implied by the
sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $10,000 under which the Company is
the licensee. There are no outstanding and no threatened disputes or
disagreements with respect to any such agreement. The Company has complied in
all material respects with all license agreements or other Contracts relating to
each software program used by the Company in connection with its business as
currently conducted, and the Company has obtained the appropriate number of
licenses for all computers and workstations on which such software is loaded or
used.
(c) Know-How Necessary for the Business.
(i) The Intellectual Property Assets are all those
necessary for the operation of the Company's business as it is currently
conducted. The Company is the owner of all right, title, and interest in and to
each of the Intellectual Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims other than
Permitted Liens, and has the right to use without payment to a third party all
of the Intellectual Property Assets.
(ii) Section 3.22(c) of the Disclosure Letter contains a
complete and accurate list of all former and current employees of the Company
who have executed written Contracts with the Company that assign to the Company
all rights to any inventions, improvements, discoveries, or information relating
to the business of the Company. The form or forms of such Contracts are included
in Section 3.22(c) of the Disclosure Letter. No employee of the Company has
entered into any Contract that restricts or limits in any way the scope or type
of work in which the employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his work to anyone other
than the Company.
(d) Patents and Copyrights. The Company does not own or hold any
Patents or Copyrights. None of the products manufactured and sold, nor any
process or know-how used, by the Company infringes or is alleged to infringe any
patent, copyright or other proprietary right of any other Person.
(e) Trademarks. Section 3.22(e) of Disclosure Letter contains a
complete and accurate list and summary description of all Marks. None of the
Marks has been registered with the United States Patent and Trademark office.
The Company is the owner of all right, title, and interest in and to each of the
Marks, free and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims. No Xxxx is infringed or has been challenged
or threatened in any way. None of the Marks used by the Company infringes or is
alleged to infringe any trade name, trademark, or service xxxx of any third
party.
(f) Trade Secrets. The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are not
part of the public knowledge or literature, and have not been used, divulged, or
appropriated either for the benefit of any Person (other than the Company) or to
the detriment of the Company. No Trade Secret is subject to any adverse claim or
has been challenged or threatened in any way that could have a Material Adverse
Effect.
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(g) Web Sites. Section 3.22(g) of the Disclosure Letter contains a complete and
accurate list and summary description of all of the Company's Web Sites. The
Company is the owner or registrant of all Web Sites, free and clear of all
liens, security interests, charges, claims encumbrances or other adverse claims
other than Permitted Liens, and no challenge or Proceeding has been commenced or
to the Sellers' Knowledge threatened with respect to any of the Web Sites.
3.23 CERTAIN PAYMENTS. Neither the Company nor any director,
officer, agent, or employee of the Company, or, to Seller's Knowledge, any other
Person associated with or acting for or on behalf of the Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Affiliate of the Company, or
(iv) in violation of any Legal Requirement, or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
3.24 DISCLOSURE. No representation or warranty of Sellers in this
Agreement and no statement in the Disclosure Letter omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS. No Seller or any Related
Person of any Seller or of the Company has, or since the first day of the next
to last completed fiscal year of the Company has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in or pertaining to the Company's business. No Seller nor any Related
Person of any Seller has or may acquire any rights under, or has or may become
subject to any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Company. No Seller or
any Related Person of Sellers or of Company is, or since the first day of the
next to last completed fiscal year of the Company has owned (of record or as a
beneficial owner) an equity interest or any other financial or profit interest
in, a Person that has (i) had business dealings or a material financial interest
in any transaction with the Company, or (ii) engaged in competition with the
Company with respect to any line of the products or services of the Company (a
"Competing Business") in any market presently served by the Company. Except as
set forth in Section 3.25 of the Disclosure Letter, no Seller or any Related
Person of any Seller or of the Company is a party to any Contract with, or has
any claim or right against, the Company.
3.26 BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement other than professional fees payable to Xxxxxxx Capital Advisors, LLC,
the Sellers' sole broker with respect to this Agreement and the Contemplated
Transactions ("Sellers' Broker"). Sellers are solely responsible for the payment
of any and all amounts due to Sellers' Broker, and any and all outstanding
amounts due to Sellers' Broker shall be paid by the Sellers at or immediately
prior to the Closing.
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3.27 BUSINESS RELATIONSHIPS. Section 3.27 of the Disclosure Letter
contains a complete and accurate list of each customer of the Company that
accounted for more than three percent (3%) of the total revenues of the Company
in each of the last three (3) fiscal years of the Company, and sets forth the
total revenues derived from each such customer during each of such fiscal
periods. Since the date of the Balance Sheet, the Company has not suffered any
loss of employees or, suffered loss of good will or an adverse change in the
relationship with any suppliers, customers, creditors, agents or others having
business relationships with the Company that materially and adversely affects
the business operations or, to Sellers' Knowledge, the prospects of the Company.
Except as set forth in Section 3.27 of the Disclosure Letter, the Company has
not been involved in any material controversy with any of its customers or
suppliers. The Company has not been advised by any of its customers or suppliers
that such customer or supplier was or is intending to terminate its relationship
with the Company or would not continue to purchase supplies or services for
future periods on account of any dissatisfaction with the Company's performance
or due to the transactions contemplated hereby. All business placed by all
employees or other agents of the Company has been placed in the name of the
Company, and all fees and compensation on such business have been paid to and
are the property of the Company.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
New York.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of any of the Ancillary Agreements to which it
is a party, and assuming the due authorization, execution and delivery thereof
by the other parties thereto, such Ancillary Agreements will constitute the
legal, valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms. Buyer has the absolute and unrestricted
right, power, and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party and to perform its obligations
hereunder and thereunder.
(b) Neither the execution and delivery of this Agreement by Buyer nor
the consummation or performance of any of the Contemplated Transactions by Buyer
will give any Person the right to prevent, delay, or otherwise interfere with
any of the Contemplated Transactions.
(c) Except as set forth in Schedule 4.2(c), Buyer is not and will not
be required to obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
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4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
threatened.
4.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
4.6 SUFFICIENT FUNDS. Buyer currently has, and on the Closing Date
will have, sufficient available sources of capital to pay all amounts required
to be paid hereunder.
5. COVENANTS.
5.1 FURTHER ASSURANCES. Sellers shall use commercially reasonable
efforts to implement the provisions of this Agreement, and for such purpose
Sellers, at the request of Buyer and at no cost to Sellers, at or after the
Closing, shall, without further consideration, promptly execute and deliver, or
cause to be executed and delivered, to Buyer such documents and other
instruments in addition to those required by this Agreement, in form and
substance satisfactory to Buyer, and take all such other actions, as Buyer may
reasonably deem necessary or desirable to implement any provision of this
Agreement and/or to further the Contemplated Transactions and obtain the benefit
thereof for Buyer. Sellers will take no action to terminate or limit existing or
prior coverages as applicable to the pre-closing activities of the Company or
the Company's ability to make claims under those coverages. The Company and
Sellers shall not revoke the Company's election to be taxed as an S corporation
within the meaning of IRC Sections 1361 and 1362, nor shall the Company and
Sellers take or allow any action to be taken that would result in the
termination of the Company's status as a validly electing S corporation within
the meaning of IRC Sections 1361 and 1362.
5.2 TAX ELECTION. The Company and each Seller shall join with
Buyer in making an election under IRC Section 338(h)(10) (and any applicable
corresponding election under state, local and foreign tax law) with respect to
the purchase and sale of the Shares hereunder (collectively, a "Section
338(h)(10) Election") and shall cooperate in filling-out and filing a Form 8023
pursuant to Section 2.4(g). Company and Sellers shall include any income, gain,
loss, deduction, or other tax item resulting from the Section 338(h)(10)
Election on their respective tax returns to the extent required by applicable
law. Sellers shall also pay any Tax imposed on the Company attributable to the
making of the Section 338(h)(10) Election, including (i) any Tax imposed under
IRC Section 1374 and not taken into account in computing Net Book Value on the
Closing Date, (ii) any Tax imposed under Regulation 1.338(h)(10)-1(d)(5), or
(iii) any state, local or foreign Tax imposed on the Company's gain and not
taken into account in computing Net Book Value on the Closing Date, and Sellers
shall indemnify Buyer and the Company in accordance with the provisions of
Section 6.11 of this Agreement against any Adverse Consequences or Tax Loss as a
result of any failure on the part of Seller to join in making a Section
338(h)(10) Election or to pay any such Taxes.
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5.3 CONFIDENTIALITY AGREEMENT OF SELLERS. Each Seller acknowledges
and agrees that all Confidential Information known or obtained by the Seller,
whether before or after the date hereof, is the property, as appropriate, of the
Company or the Buyer. Therefore, each Seller agrees that he will not, at any
time, disclose or cause to be disclosed to any unauthorized Persons or use or
cause to be used for his own account or for the benefit of any third party any
Confidential Information, whether Seller has such information in Seller's memory
or embodied in writing or other physical form or any computer readable format,
without Buyer's written consent, unless and to the extent that the Confidential
Information (i) is or becomes generally known to and available for use by the
public other than as a result of Seller's fault or the fault of any other Person
bound by a duty of confidentiality to Buyer or the Company or, (ii) becomes
available to Seller on a non-confidential basis, from a source who is entitled
to disclose such information without breach of confidentiality to the Company,
other than the Company or any of its employees; or (iii) to the extent that
disclosure is required by law (in which event Seller shall give Buyer as much
notice of such disclosure as is practicable and permitted by law and shall
cooperate with Buyer to obtain appropriate protective orders). Each Seller
agrees to deliver to Buyer at the time of execution of this Agreement, and at
any other time Buyer may request, all documents, memoranda, notes, plans,
records, reports, summaries and other documentation, models, components,
devices, or computer software, whether embodied in a disk or in other form (and
all copies of all of the foregoing), relating to the businesses, operations, or
affairs of the Company and any other Confidential Information that Seller may
then possess or have under Seller's control. If Seller breaches the covenants
set forth in this Section 5.3, each of Buyer and the Company, in addition to the
right to recover Damages as provided in Section 6 and any other rights it may
have, shall have the right to obtain injunctive or other equitable relief to
restrain any breach or threatened breach or otherwise to specifically enforce
the provisions of this Section 5.3, it being agreed that money damages alone
would be inadequate to compensate the Buyer and the Company and would be an
inadequate remedy for such breach.
5.4 APPROVALS OF GOVERNMENTAL BODIES; CONSENTS. Buyer and Sellers
will, and will cause each of their respective Related Persons to, make all
filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions and cooperate with each other with respect to all
filings that are required by Legal Requirements to be made in connection with
the Contemplated Transactions. Buyer will, and will cause each of its Related
Persons to cooperate with Sellers in obtaining all consents identified in
Section 3.2 of the Disclosure Letter. Notwithstanding the foregoing, this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
5.5 ACCOUNTS RECEIVABLE. Any Accounts Receivable shown on the
Closing Financial Statements and collected by Buyer after the Closing for which
Sellers have previously paid the Buyer (by way of indemnification payment or
otherwise), will be paid over to Sellers by Buyer by the tenth day of the month
following the month in which any such Accounts Receivable were collected. In the
event that any Accounts Receivable are collected by Buyer after Closing and the
amount of any such collected Account Receivable was not paid to Buyer but
instead was previously counted against the Basket (as defined in Section 6.6(a)
below), then the amount of the previous Basket allocation shall be credited by
such collected Account Receivable and not be
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counted against the Basket in any determination of Damages counted against the
Basket. Buyer agrees to use the same good faith efforts to collect uncollected
Accounts Receivable of the Company following the Closing as it uses to collect
its own; provided, however, that Buyer undertakes no obligation to commence
litigation or to take extraordinary actions to collect such uncollected Accounts
Receivable. Sellers agree that they will not attempt to contact any Accounts
Receivable debtor or take any other steps to collect any uncollected Accounts
Receivables of the Company following the Closing.
6. INDEMNIFICATION; REMEDIES.
6.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE.
Subject to Section 6.5 below, all representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter and any other certificate
or document delivered pursuant to this Agreement will survive the Closing and
for the period of time specified in Section 6.5 below. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted by Buyer with respect to, or any Knowledge acquired
(or capable of being acquired) at any time by Buyer, whether before or after the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations. Any payment made by a
Seller to Buyer pursuant to this Section 6 shall be deemed to the extent
permitted by Applicable Law to be a reduction in the Purchase Price and shall
not be deemed to be an item of income or expense, and all parties hereto agree
to prepare their Tax Returns consistent therewith.
6.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Company, and
their respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), or expense (including reasonable costs of
investigation and defense and reasonable attorneys' fees), whether or not
involving a third-party claim, in each case net of associated tax benefits
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by Sellers in
this Agreement (without giving effect to any supplement to the Disclosure
Letter), the Disclosure Letter or any other certificate or document delivered by
Sellers pursuant to this Agreement;
(b) any Breach by any Seller of any covenant or obligation of such
Seller in this Agreement or any other agreement or document delivered by such
Seller pursuant to this Agreement;
(c) any product shipped or manufactured by, or any services provided
by, the Company prior to the Closing Date;
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(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or the Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions, except to the extent such fees, commissions or payments are
reflected as liabilities on the Closing Financial Statements;
(e) any claim or right of the Sole Former Shareholder of the Company
against the Company or Buyer or any of its securities or otherwise arising in
connection with Contemplated Transactions; or
(f) any claim that, at the time of the consummation Contemplated
Transactions, any Person other than Sellers owns or holds, or has any right,
title or interest in or to, any equity securities of the Company.
Notwithstanding the foregoing, each Seller, severally, and not jointly,
will indemnify and hold harmless the Indemnified Persons for, and will pay to
the Indemnified Persons the amount of, any and all Damages, arising, directly or
indirectly, from a Breach by such Seller of his representations and warranties
in Section 3.3(a), and subject to Section 6.6, such Seller shall be liable for
the entire amount of any Damages as a result of any such Breach of the
representations and warranties in Section 3.3(a) by such Seller.
6.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
SELLERS--ENVIRONMENTAL MATTERS. Consistent with the provisions of Section 6.2,
Sellers, jointly and severally, will indemnify and hold harmless Buyer and the
other Indemnified Persons for, and will pay to Buyer, the Company, and the other
Indemnified Persons the amount of, any Damages (including costs of cleanup,
containment, or other remediation) arising, directly or indirectly, from or in
connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of or
relating to: (i) (A) the ownership, operation, or condition at any time on or
prior to the Closing Date of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
Sellers or the Company has or had an interest, or (B) any Hazardous Materials or
other contaminants that were present on the Facilities or such other properties
and assets at any time on or prior to the Closing Date; or (ii) (A) any
Hazardous Materials or other contaminants, wherever located, that were, or were
allegedly, generated, transported, stored, treated, Released, or otherwise
handled by Sellers or the Company or by any other Person for whose conduct they
are or may be held responsible at any time on or prior to the Closing Date, or
(B) any Hazardous Activities that were, or were allegedly, conducted by Sellers
or the Company or by any other Person for whose conduct they are or may be held
responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other damage
of or to any Person, including any employee or former employee of Sellers or the
Company or any other Person for whose conduct they are or may be held
responsible, in any way arising from or allegedly arising from any Hazardous
Activity conducted or allegedly conducted with respect to the Facilities or the
operation of the Company prior to the Closing Date, or from Hazardous Material
that was (i) present or suspected to be present on or before the Closing Date
- 39 -
on or at the Facilities (or present or suspected to be present on any other
property, if such Hazardous Material emanated or allegedly emanated from any of
the Facilities and was present or suspected to be present on any of the
Facilities on or prior to the Closing Date) or (ii) Released or allegedly
Released by Sellers or the Company or any other Person for whose conduct they
are or may be held responsible, at any time on or prior to the Closing Date.
Buyer will be entitled to control any Cleanup, any related Proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 6.3, provided that
Buyer must first notify and consult with Sellers regarding any Cleanup and
related Proceedings. The procedure described in Section 6.8 will apply to any
claim solely for monetary damages relating to a matter covered by this Section
6.3.
6.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
6.5 TIME LIMITATIONS. Sellers will have no liability (for
indemnification or otherwise)(i) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.3(a), 3.11, 3.13, 3.19, 3.20 and 6.11,
unless on or before 18 months from the Closing Date Buyer notifies Sellers of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Buyer; (ii) with regard to a claim with respect to Sections
3.11, 3.13, 3.20 and 6.11, unless on or before 90 days following the expiration
of the applicable statute of limitations (or if such statute of limitations has
been waived, after the expiration of the period indicated in the waiver) Buyer
notifies Sellers of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer; and (iii) a claim with
respect to Sections 3.3(a) and 3.19 or a claim for indemnification or
reimbursement not based upon any representation or warranty or any covenant or
obligation to be performed or complied with prior to the Closing Date may be
made at any time. Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before 18 months from the Closing Date Sellers notify Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Sellers.
6.6 BASKET LIMITATION AND CAP.
(a) Sellers will have no liability (for indemnification or otherwise)
with respect to the matters described in this Section 6, until the total of all
Damages with respect to such matters exceeds $150,000 (the "Basket"), and then
only for the amount by which such Damages exceed $75,000. Except as provided
below, the liability of the Sellers with respect to the matters described in
this Section 6 will be apportioned as set forth on Schedule 6.6(a) attached
hereto, provided, that, the parties hereby agree that the aggregate liability of
all Sellers with regard to
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such matters shall not exceed the Purchase Price. Notwithstanding the foregoing,
this Section 6.6(a) will not apply to any Breach of any of the Sellers'
representations and warranties of which Seller had knowledge at any time prior
to the date on which such representation and warranty is made or any intentional
Breach by Seller of any covenant or obligation, and Sellers will be jointly and
severally liable for all Damages with respect to such Breaches.
(b) In the event that the Financial Statements or Closing Financial
Statements reflect a reserve for a liability of the Sellers with respect to any
matter described in this Section 6 and such liability is included in the
calculation of Net Book Value, then the Sellers' liability with respect to such
matter will be limited to the amount, if any, by which the Damages with respect
to such matter exceeds the amount reserved for such liability on the Financial
Statements or Closing Financial Statements and included in the calculation of
Net Book Value.
(c) Buyer will have no liability (for indemnification or otherwise)
with respect to the matters described in this Section 6, until the total of all
Damages with respect to such matters exceeds $150,000, and then only for the
amount by which such Damages exceed $75,000. Except as provided below, the
liability of Buyer with respect to the matters described in this Section 6 shall
in no event exceed the Purchase Price. However, this Section 6.6(c) will not
apply to any Breach of any of Buyer's representations and warranties of which
Buyer had knowledge at any time prior to the date on which such representation
and warranty is made or any intentional Breach by Buyer of any covenant or
obligation, and Sellers will be liable for all Damages with respect to such
Breaches.
6.7 ESCROW. Buyer may assert a claim for indemnification under the
Escrow Agreement by notice to Sellers' Representative and the Escrow Agent
specifying in reasonable detail the basis for such claim to the extent then
known by Buyer and the amount to which Buyer is entitled under this Section 6,
all as more fully provided in the Escrow Agreement. Buyer is authorized to
recover from the funds in escrow the entire amount of, or any portion of, any
claim against any Seller without regard to the amount contributed or deemed to
be contributed by such Seller. Sellers will settle among themselves any right to
contribution or indemnity with regard to amounts paid to Buyer from the escrowed
funds. The amount held in escrow, if and when disbursed to Sellers, shall be
treated on an installment sale basis and shall be taken into income by Sellers
in the year in which it is received, unless Sellers elect in their sole
discretion to elect out of installment sale treatment. Neither the giving of
notice of a claim under the Escrow Agreement nor the failure to give such notice
will constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
6.8 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section 6.2,
6.4, or (to the extent provided in the last sentence of Section 6.3) Section 6.3
of notice of the commencement of any Proceeding against it, such indemnified
party will, if a claim is to be made against an indemnifying party under such
Section, give notice to the indemnifying party of the commencement of such
claim, but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such action is prejudiced by the indemnifying party's failure to give such
notice.
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(b) If any Proceeding referred to in Section 6.8(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 6 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
6.9 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by written notice to the party from whom indemnification is sought.
6.10 NOTICE TO SELLERS. Any notice to all Sellers pursuant to this
Section 6 shall be sent to the attention of the Sellers' Representative, and
notice sent to the Sellers' Representative shall be deemed sufficient notice to
all Sellers under this Section 6.
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6.11 TAX INDEMNIFICATION; TAX BENEFIT.
(a) Indemnification for Direct Taxes by Sellers. Notwithstanding any
other provision contained in the Agreement to the contrary, the Sellers, jointly
and severally, shall indemnify the EDO Group, Buyer and the Company (each an
"Indemnitee") for, and shall defend and hold each such Indemnitee harmless from,
the full amount of any Taxes assessed against or collected from each such
Indemnitee and any other Adverse Consequences arising therefrom for all taxable
periods ending on or before the Closing Date, and the portion through the end of
the Closing Date for any taxable period that includes (but does not end on) the
Closing Date including, without limiting the generality of the foregoing, Taxes
assessed or collected (i) as a result of Company's failure to properly make a
valid S corporation election or to maintain eligibility for S corporation status
within the meaning of IRC Sections 1361 and 1362, (ii) as a result of Company's
failure to properly make a valid election to be treated as an S corporation or
achieve comparable pass-through tax treatment that is otherwise available under
any state or local tax statute, or to maintain eligibility for such S
corporation or comparable pass-through tax treatment, (iii) any failure on the
part of Seller described in Section 5.2, pertaining to the making of a Section
338(h)(10) Election (each of (i), (ii) and (iii) a "Defective Election Event"),
(iv) as a result of the Company's failure to pay, collect or withhold Taxes, (v)
any and all Taxes of any person (other than the Company) imposed on the Company
as a transferee or successor, by contract or pursuant to any law, rule, or
regulation, which Taxes pertain to any taxable period ending on or before the
Closing, or (vi) any and all Taxes of the Company for any period for which an S
corporation election was not in effect, or with respect to Taxes other than
federal income taxes, for any period or for any jurisdiction in which
pass-through treatment similar to S corporation treatment did not apply to the
Company; provided, however, that in the cases of clauses (i)-(vi) above, Sellers
shall be liable only to the extent that such Taxes are in excess of the amount,
if any, reserved for such Taxes and taken into account in computing Net Book
Value as of the Closing Date.
(b) Indemnification for other Tax Loss. If for purposes of any Taxes,
any Indemnitee shall lose the benefit of, or shall not have, or shall not claim,
or shall lose the right to claim, or shall suffer a deferral, reduction or
disallowance of, or shall be required to apply or recapture all or any portion
of any amount (including the loss of an increase in basis of any asset of the
Company as a result of a failure to be able to make an effective Section
338(h)(10) Election) that could otherwise give rise to a deduction or other
reduction of tax were the Indemnitee to have income sufficient to use such Tax
benefit at any time (any such loss, deferral, reduction, disallowance,
application or recapture hereinafter called a "Tax Loss"), and such Tax Loss is
suffered as a result of a Defective Election Event, the Sellers, jointly and
severally, shall be obligated to pay to the Indemnitee an amount in respect of
such Tax Loss (an "Indemnity Payment") equal to an amount which, on an After-Tax
Basis, shall provide the Indemnitee with an amount equal to the excess of (A)
all interest, penalties and additions to tax incurred for federal, state and
local income tax purposes, over (B) the amount of all interest, penalties and
additions to tax that would have been incurred for federal, state and local
income tax purposes but for the loss of such Tax Attribute, in each case
assuming the Indemnitee is subject to the highest marginal combined federal,
state and local income tax rate which could be applicable to such Indemnitee.
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(c) Indemnification for Direct Taxes by Buyer. The Buyer shall
indemnify the Sellers for and shall defend and hold each of the Sellers harmless
from, the full amount of any Taxes assessed or collected from each Seller and
any Adverse Consequences arising therefrom for all taxable periods ending after
the Closing Date, and the portion after the Closing Date for any taxable period
that includes (but does not end on) the Closing Date, including without limiting
the generality of the foregoing, Taxes assessed or collected (i) for any failure
on the part of Buyer described in Section 5.2, pertaining to the making of a
Section 338(h)(10) Election, and (ii) any and all Taxes resulting from any
transaction involving the Company that occurs on the Closing Date but after the
Closing that is not a Contemplated Transaction.
(d) Transfer and Other Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with the consummation of the Contemplated Transactions
shall be borne by Sellers to the extent the Sellers are liable for such Taxes,
fees and charges, and borne by Buyer to the extent that Buyer is liable for such
Taxes, fees and charges.
(e) Tax Refunds. Any Tax refunds that are received by Buyer or the
Company, and any amounts credited against Taxes to which Buyer or the Company
become entitled, that relate to Tax periods or portions thereof ending on or
before the Closing Date shall be for the account of the Sellers and Buyer shall
pay over to the Sellers any such refund or the amount of any such credit within
fifteen (15) days after receipt or entitlement thereto to the extent such Tax
refunds and amounts credited against Taxes have not been taken into account in
computing the Net Book Value on the Closing Date. In addition, to the extent
that a claim for refund or a proceeding results in a payment or credit against
Tax by a taxing authority to Buyer or the Company of any amount accrued on the
Balance Sheet in the Closing Financial Statements, Buyer shall pay such amount
to the Sellers within fifteen (15) days of receipt or entitlement thereto to the
extent such Tax refunds and amounts credited against Taxes have not been taken
into account in computing the Net Book Value on the Closing Date. Buyer shall,
if requested by Sellers (and at Sellers' expense), cause the Company to file for
and obtain any refund or credit that would give rise to a payment under this
Section 6.11(e). No such claim that would result in a refund to the Company
shall be filed unless Buyer approves such claim, such approval not to be
unreasonable withheld. So long as such refund claim has no Material Adverse
Effect on any other Tax liability of the Company for periods ending after the
Closing Date, Buyer shall permit Sellers to control the prosecution of any such
refund claim and shall cause the Company to authorize by appropriate power of
attorney Xxxxxxx & Company or some other person, reasonably acceptable to Buyer,
as Sellers shall designate to represent the Company with respect to such refund
claim.
(f) Calculation and Payment. The amount of any Indemnity Payments under
this Section 6.11 shall be calculated by the Indemnitee's independent certified
public accountants, whose determination shall be final, binding and conclusive
on all parties.
6.12 EXCLUSIVE REMEDY. If the Closing occurs, the indemnification
provided for in this Section 6 shall be the sole and exclusive remedy for any
Breach of this Agreement; provided that the foregoing shall not be deemed to
limit in any respect any equitable remedies to which any party may be entitled.
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7. GENERAL PROVISIONS.
7.1 PURCHASE PRICE ALLOCATION. Buyer, the Company and Sellers
agree that the Purchase Price and the liabilities of the Company will be
allocated to the assets of the Company for all purposes (including Tax and
financial accounting) in a manner consistent with IRC Sections 338 and 1060 and
the regulations thereunder. Buyer, the Company and Sellers shall file all Tax
Returns (including amended returns and claims for refund) and information
reports in a manner consistent with such allocation.
7.2 TAX RETURNS. Buyer shall prepare or cause to be prepared, on a
basis consistent with the Company's past practice and custom, unless the Sellers
approve otherwise, which approval shall not be unreasonably withheld,
conditioned or delayed, and file or cause to be filed all Tax Returns for the
Company for all periods ending on or prior to the Closing Date that are filed
after the Closing Date, except for the Company's Federal S Corporation Tax
Returns and corresponding state Tax Returns required to be filed for all periods
prior to Closing and the period ending with the Closing (including the Federal S
Corporation Tax Return and corresponding state Tax Returns required to be filed
due to the deemed asset sale under IRC Section 338(h)(10)), which shall be
prepared by Sellers and approved by Buyer prior to filing, which approval shall
not be unreasonably withheld, conditioned or delayed. Seller shall provide Buyer
with a schedule of all Tax Returns of the Company to be filed for periods ending
on or prior to the Closing Date, and a list of Tax Returns for which extensions
have been filed.
7.3 COOPERATION ON TAX MATTERS.
(a) Buyer, the Company and Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns and Tax refunds and any audit, litigation or other proceeding with
respect to Taxes; provided, that Sellers shall not file, or cause to be filed,
the Company's Federal S corporation Tax Returns and corresponding state Tax
Returns of the Company required to be filed for all periods prior to Closing and
the period ending with the Closing (including the Federal S Corporation Tax
Return and corresponding state Tax Returns required to be filed due to the
deemed asset sale under IRC Section 338(h)(10)), without Buyer's prior approval,
which approval shall not be unreasonably withheld, conditioned or delayed;
provided further, that Sellers shall provide Buyer any of the aforementioned Tax
Returns to Buyer not less than sixty (60) days prior to the due date (including
properly filed extensions) for filing such Tax Returns. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information reasonably relevant to any such audit, litigation, or
other proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder. Buyer, the Company and Sellers agree (i) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the Closing until the expiration of the statute
of limitations (and, to the extent notified by Buyer or Sellers, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (ii) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company or
Sellers, as the case may be, shall allow the other party to take possession of
such books and records.
- 45 -
(b) Buyer and Sellers further agree, upon request, to use reasonable
good faith efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including with respect to the
transactions contemplated hereby), provided that any costs and expenses incurred
in connection with such effort shall be paid by the requesting party.
(c) The Company, Buyer, and Sellers agree that should any Governmental
Body determine, find, hold, or propose to determine, find or hold that the
Company's status as an S corporation, as defined in Section 1361 of the IRC, has
at any time been terminated as a result of an inadvertent invalid election or
inadvertent termination, each as defined in Section 1362(f) of the IRC, then the
Company, Buyer, and Sellers shall take such steps as are necessary or advisable
to obtain a waiver of the effects of such a termination (a "Waiver"), including
but not limited to the filing of a ruling request with the IRS, and agreeing to
such terms and conditions as the IRS may impose as a condition of granting a
Waiver. The Sellers shall bear all costs associated with obtaining a Waiver,
including but not limited to any fee imposed by the IRS associated with the
filing of a ruling request or the obtaining of a ruling.
7.4 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
7.5 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer determines.
Sellers and Buyer will consult with each other concerning the means by which the
Company employees, customers, and suppliers and others having dealings with the
Company will be informed of the Contemplated Transactions, and Buyer will have
the right to be present for any such communication. Notwithstanding the
foregoing, Buyer shall have the right to make such disclosure as is required
under the Federal securities laws, in which event Buyer shall provide Seller
with a copy of such disclosure reasonably in advance.
7.6 CONFIDENTIALITY. If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such written
Confidential Information as the other party may reasonably request. Whether or
not the Closing takes place, Sellers waive, and will upon Buyer's request cause
the Company to waive, any cause of action, right, or claim arising out of the
access of Buyer or its representatives to any Confidential Information of the
Company except for the intentional competitive or grossly negligent misuse by
Buyer of such Confidential information.
7.7 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other
- 46 -
parties); provided, that any notice which is being given to all of the Sellers
shall be sent to the attention of the Sellers' Representative, and any notice
sent to the Sellers' Representative shall be deemed notice to all Sellers:
SELLERS' REPRESENTATIVE:
Xxxxxxx X. Xxxx
000 Xxxxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Attn: Xxxxxx X. Xxxxxx, Esq.
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile No: 202-639-7003
BUYER: EDO Corporation
Attn: Secretary
00 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No: 000-000-0000
with a copy to:
Day, Xxxxx & Xxxxxx LLP
Attn: Xxxxx X. Xxxxxxxxx, Esq.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile No: 000-000-0000
7.8 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement shall be brought against any of the parties in the courts of the
Commonwealth of Virginia, or, if it has or can acquire jurisdiction, in the
United States District Court for the Eastern District of Virginia, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
7.9 FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
- 47 -
7.10 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
7.11 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated October 25,
2002) and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
7.12 SELLERS' REPRESENTATIVE. Each Seller irrevocably appoints
Xxxxxxx X. Xxxx (the "Sellers' Representative") as his, her or its agent, proxy
and attorney-in-fact for all purposes under this Agreement, and each Seller
authorizes the Sellers' Representative to do any and all of the following for
the Seller and in the Seller's name and stead: (i) to execute, acknowledge, as
appropriate, and deliver to Buyer any certificate, document or agreement
referred to herein or contemplated hereby, including this Agreement, the Shares,
and the Seller's Closing Documents; (ii) to accept, receipt for and deposit any
funds or other amounts owing to the Seller hereunder; (iii) to represent,
negotiate on behalf of and bind the Seller in connection with the determination
of the Adjustment Amount, any negotiations or agreements with Buyer with respect
to the Adjustment Amount, and any presentation to or discussions with the
Accountants with respect thereto; (iv) to execute, acknowledge, as appropriate,
and deliver such modifications and amendments to this Agreement or Sellers'
Closing Documents as the Sellers' Representative shall deem advisable in his
discretion; and (v) to do any and all other acts and things in connection with
this Agreement as Sellers' Representative shall deem advisable in his
discretion. The agency created hereby shall be deemed irrevocable and coupled
with an interest; Buyer shall be entitled to rely upon the powers granted herein
with respect to any matter relating to this Agreement; and any question which
may arise concerning the power or authority of the Sellers' Representative to
act for each Seller shall be interpreted and construed in favor of the authority
of the Sellers' Representative.
7.13 DISCLOSURE LETTER.
(a) Except where expressly indicated, the disclosures in the Disclosure
Letter, and those in any supplement or attachment thereto, must relate only to
the representations and warranties in the Section of the Agreement to which they
expressly relate and not to any other representation or warranty in this
Agreement.
- 48 -
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
7.14 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties except that Buyer may assign any of its rights
under this Agreement to any wholly-owned subsidiary of the Buyer; provided that
no such assignment shall relieve Buyer of its obligations hereunder. Subject to
the preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
7.15 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
7.16 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
7.17 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
7.18 GOVERNING LAW. This Agreement will be governed by the laws of
the State of New York without regard to conflicts of laws principles.
7.19 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
EDO CORPORATION
By: _______________________________________
Xxxxxxx X. Xxxxx
Vice President - Administration
SELLERS:
___________________________________________
Xxxxxxx X. Xxxx
___________________________________________
Xxxx X. Xxxxxxx
___________________________________________
Xxxx X. Xxxxx
